July 31, 2014

Wisconsin Gov. Scott Walker got some good news on Thursday, as the state Supreme Court issued a 5-2 ruling upholding the defining act of his term as governor, a sweeping 2011 law that all but eliminates collective bargaining for most public employees.

Burke is a former executive at Trek Bicycles, the big Wisconsin-based bike manufacturer founded by her father, and frequently invokes her business experience on the campaign trail. In response, Walker has started going after Burke with attacks borrowed straight from the playbook that Democrats have used against any number of Republican businessmen-candidates over the years, most notably against Mitt Romney in 2012. Walker has launched two ads hitting Burke for Trek’s outsourcing much of its manufacturing overseas. One ad shows small children being read a bedtime story about Burke sending jobs to China: “Mary, Mary, quite contrary, how does your fortune grow? By making millions of dollars . . . sending jobs overseas that could have been done in Wisconsin . . . to countries where women and children might work up to 12 hours a day, earning only two dollars an hour.”

Another one includes images of wan, underfed young Asian women, meant to represent the workers that Trek is underpaying in China. It concludes: “Mary Burke: Job creator? Not so much.” A website run by the Wisconsin Republican Party goes so far as to brand Burke a “one-percenter” and hits her for having worked for McKinsey, “a global consulting firm known for its outsourcing expertise.”

This is surprising stuff coming from a Republican who throughout his career has fashioned himself as a pro-business conservative willing to stand firm against liberals making cheap populist appeals. And Walker was called on it by one of his biggest boosters, the Wall Street Journal editorial page, where Allysia Finley chided him, hard:

We normally associate criticism of outsourcing with Democrats, but Wisconsin Gov. Scott Walker is a reminder that Republicans aren’t above playing the “Benedict Arnold CEO” card themselves to fan populist furies…Economic populism is usually the province of Democrats who don’t understand how free markets work or who cynically hope to exploit voters’ insecurities. Mr. Walker is better than that.

What has been less noted, though, is a populist attack by Walker that is even more eyebrow-raising than the anti-China one: Walker and his allies have also been hammering Trek for paying little in corporate income taxes. Walker himself spoke against Burke for “running TV ads that talk about tax incentives for companies that add jobs here in this state when you personally profit from a company that hasn’t paid corporate income taxes since 1982.”

Well, there’s a good reason why Trek hasn’t paid many corporate income taxes: like an increasing number of businesses, it’s organized as an S-corporation, which means that gains are passed on to its shareholders, who pay personal income taxes on the gains.

S-corps have been grist for political debate before, not least because both John Edwards and Newt Gingrich managed to save themselves tens of thousands of dollars in payroll taxes ($600,000 in Edwards’ case) by organizing their own enterprises that way. But those calling for reform of the S-corp provision are almost exclusively liberal Democrats who view it as a loophole that allows wealthy lawyers, doctors and other high-earning professionals to reduce their tax bill. Senate Democrats have been pushing to close the S-corp loophole, while congressional Republicans have decried such efforts as an attack on “small business owners.”

And now here is Scott Walker, who trumpets his success at lowering taxes in Wisconsin and making it a business-friendly environment, going after Mary Burke for the fact that Trek is set up in the same way as more than 4 million businesses nationwide. Huh?

Walker’s Paul Wellstone turn could come back to haunt him should he survive reelection and run for the Republican presidential nomination in 2016. Why is he taking the risk of alienating them and opening himself to attacks in the GOP primaries? Tom Bevan of RealClearPolitics suggests it’s a sign of just how worried Walker is about losing this time around: “It smacks of desperation,” writes Bevan. The fact is, some of those who voted for Walker in the 2012 recall election sparked by the anti-union legislation were doing so more out of protest against the recall process than out of love for Walker. Dig into the polls and it’s not hard to detect some Walker fatigue—even some voters feeling good about the direction Wisconsin is headed in say they will vote against him.

But I’d suggest there’s more to it than just the pressure Walker is feeling from Burke. Walker may be willing to risk accusations of apostasy for the reason I laid out in my recent cover story on him: because he enjoys such deep, abiding support from the airtight, monolithic Republican bubble in hyper-polarized Wisconsin, which may lead him to feel he has little to fear in taking a couple shots at Burke that are technically breaking with dogma. Already, Walker is getting back-up from the fiercely loyal conservative echo chamber in Wisconsin—the Right Wisconsin website led by Milwaukee talk radio host Charlie Sykes took up Walker’s side, arguing that it was hypocritical for Burke to have enjoyed the benefits of a tax status that many Democrats criticize, while completing overlooking the hypocrisy evident in Walker attacking a successful business for doing the things that successful businesses do: seeking out low-cost labor and money-saving tax structures. If a Republican can get away with class-baiting attacks on a wealthy businesswoman without fear of tut-tutting from his own local allies, what’s to stop him?